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On the distributional consequences of epidemics

Author

Listed:
  • Raouf Boucekkine

    (Department of economics and CORE - UCL - Université Catholique de Louvain = Catholic University of Louvain, Department of Economics - University of Glasgow)

  • Jean-Pierre Laffargue

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

Abstract

We develop a tractable general theory for the study of the economic and demographic impact of epidemics, notably its distributional consequences. To this end, we build up a three-period overlapping generations model where altruistic parents choose optimal health expenditures for their children and themselves. The survival probability of adults and children depends on such investments. Agents can be skilled or unskilled. In this paper, epidemics are modeled as one-period exogenous shocks to the adults' survival rates. We first show that such epidemics have permanent effects on the size of population and on the level of output. However, the income distribution is shown to be unaltered in the long-run. Second, we show that this distribution may be significantly altered in the medium-term: in particular, the proportion of the unskilled will necessarily increase at that term if orphans are too penalized in the access to education.

Suggested Citation

  • Raouf Boucekkine & Jean-Pierre Laffargue, 2010. "On the distributional consequences of epidemics," PSE-Ecole d'économie de Paris (Postprint) hal-00642090, HAL.
    • Handle: RePEc:hal:pseptp:hal-00642090
    DOI: 10.1016/j.jedc.2009.09.003
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    JEL classification:

    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • D9 - Microeconomics - - Micro-Based Behavioral Economics
    • I1 - Health, Education, and Welfare - - Health
    • I2 - Health, Education, and Welfare - - Education

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